Important changes to Agricultural Property Relief (APR) | Inheritance tax planning | Kreston Reeves

As things stand qualifying agricultural assets can be completely exempt from Inheritance Tax (IHT) as a result of 100% Agricultural Property Relief (APR).

Qualifying assets include land and buildings used for the purposes of agriculture and can include assets that you use in your own farming trade, or that are used and occupied by someone else.

APR is only available on the agricultural value of assets. Where you are using the assets in your own trade you may be able to benefit from Business Property Relief (BPR) which would give an exemption on the full market value of the assets.

These rules are set to change from 6 April 2026.

Under the new rules only the first £1m of will be exempt from Inheritance Tax, and any value over this £1m threshold will be taxed at an effective rate of 20%.

The £1m threshold is per individual and cannot be transferred between spouses.

This change in the rules will affect individuals who have agricultural land and buildings with a value of more than £1m.

What could the impact be of these changes?

If you have farmland worth £3m, these changes could increase your IHT exposure by £400,000.

If you have farmland worth £6m, your beneficiaries would pay £1m more Inheritance Tax.

A key consideration will be how an increased tax liability could be funded after your death.

If you could be affected by these changes, what should you be thinking about now?

You should establish what the impact of these changes will be on your estate.

With this information you can consider what steps you might want to take to mitigate the potential liability.

Depending on your circumstances this could involve:

• Transferring assets to your spouse
• Giving assets away to future generations
• Transferring assets into Trust

You should also review your Will to ensure that the £1m allowance can be used. Even if your Will establishes an agricultural and business property trust on your death, the terms of your Will or letter of wishes may need to be updated to achieve the best possible tax result.

At Kreston Reeves, we can provide advice, help and guidance on a wide range of areas including tax and legal. Please contact us today to get help with your inheritance tax planning. You can also visit our website to explore our inheritance tax guide: https://www.krestonreeves.com/inherit...

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